I am interested in Environmental and Climate Economics, Energy Economics, Computable General Equilibrium Modeling, International Trade,  and Economic Growth.

My Google Scholar Profile - My Research Gate Profile - My SSRN Profile - My IDEAS RePEc Profile

        

Working papers

International Trade and the Transmission of Temperature Shocks, with Daniel Osberghaus.

Based on an analytically derived general equilibrium Gravity trade model, we examine how the adverse impacts of weather are distributed through the trade network. Exploiting a rich fixed effects structure, we find significant negative short-run effects of high temperature on exports, which are intensifying in the labour-intensity of exports. As the estimation allows to specify the general equilibrium trade model, we conduct counterfactual simulations to assess the full incidence of temperature shocks. We find that equilibrium and price adjustments reduce the economic costs by around 20 percent, but significant costs arise also for countries not directly exposed to high temperatures.

Download Working Paper|SSRN|ZEW Discussion Paper|Slides|mentioned in Handelsblatt and The Independent|Interview with Hessischer Rundfunk (starting at 7:20 min)


Current Projects


Peer-reviewed articles

Cournot, Pigou, and Ricardo walk in a bar – Unilateral environmental policy and leakage with market power and firm heterogeneity (2022), Journal of the Association of Environmental and Resource Economists 9(6), 1161-1195, with Claudio Baccianti. 

Policymakers aiming for the unilateral regulation of transboundary pollutants, such as greenhouse gases, fear as a consequence rising emissions in non-regulating countries. This so-called pollution haven or carbon leakage effect is of particular concern in emission-intensive and trade-exposed sectors such as steel, aluminium or chemical production. While these industries are often characterised by market concentration, most models that study the effectiveness of unilateral environmental policies operate under perfect or monopolistic competition, ruling out the adjustment of markups and cost pass-through rates. We study the determinants of emission leakage using a two-country general equilibrium model with heterogeneous product varieties and Cournot competition. We show that firms from the non-regulating country respond to the implementation of Pigouvian emission taxes on their competitors abroad and the subsequent gain in comparative advantage by increasing markups rather than output. We find that this effect, jointly with the exit of the least productive firms, can provoke a reduction of emissions in the non-regulating country and thus increase the effectiveness of unilateral emission regulation. Consumption gains from selection in non-regulating countries are offset by the use of market power by local firms.

Publication|Ungated working Paper|SSRN|Slides|GAMS code for simulations (GitHub)

More birds than stones – A framework for second-best energy and climate policy adjustments (2021), Journal of Public Economics 203, 104515, with Carolyn Fischer and Michael Hübler.

A well-known principle in public economics states that at least as many policy instruments as market failures are required to achieve an efficient outcome. In practice, however, regulatory power is often constrained, making implementing the first-best policy portfolio difficult or impossible. We analyze analytically and numerically how available policy instruments should be adjusted vis-a-vis the first-best to account for under-internalized secondary market failures. Consider, for example, the power sector: alongside the external costs of emissions, evidence suggests that consumers undervalue energy efficiency investments, and knowledge spillovers hamper research and development (R&D) and learning-by-doing in low-carbon technologies. By exploring the potential and limits of policy instrument substitution, we provide suggestions for adjusting policies in second-best situations. We calibrate the theoretical model to the European electricity sector and find that, compared with the first-best policy portfolio, relying on carbon pricing alone increases the policy cost of the EU emissions target by about 30%. Uninternalized R&D spillovers contribute the most to this increase, and are the most difficult to address indirectly, even with subsidies supporting learning-by-doing. By contrast, almost 40% of the additional cost created by the absence of optimal energy efficiency subsidies can be recuperated by a second-best electricity tax.

Publication|Ungated working paper |SSRN|Mathematica code for simulations (GitHub)

The Cost of Debt of Renewable and Non-Renewable Energy Firms (2021), Nature Energy 6, 135-142, with Karol Kempa and Ulf Moslener.

The risks imminent to younger technologies and markets may hinder renewable energy firms’ access to financing. This could curtail the investment needed for the transformation of the global energy sector. However, comprehensive analyses of the cost of debt of renewable and non-renewable energy firms are lacking. Here, we empirically analyse the differences between the costs of debt of firms developing and producing renewable energy technologies and of non-renewable energy firms. We use global micro-level data on individual loans matched to firm-level data. The results suggest that renewable energy firms might face a higher cost of debt initially, when technologies and markets are young and immature. However, a cost advantage of renewable energy firms emerges over time. The results also show that the costs of debt of renewable energy firms are lower in economies with a more developed banking sector and comparatively stringent environmental policies. 

Read paper | Link journal website | Blog post | Slides


On the Effects of Unilateral Environmental Policy on Offshoring in Multi-Stage Production Processes (2018), Canadian Journal of Economics 51(4), 1221-1256, with Simon Koesler and Andreas Löschel.

We extend the literature on global supply chains by analyzing if and how unilateral environmental regulation induces off- shoring. We develop an analytical model of two-stage production processes that can be distributed between two countries and investigate unilateral emission pricing and its supplementation with border carbon taxes. In contrast to existing  final good models, we are able to show how impacts of regulation differ across the different stages of the supply chain, depending on the interplay of comparative advantages and general equilibrium effects. To get a more comprehensive picture, we subsequently apply a computable general equilibrium model that includes a representation of international supply chains. We find heterogeneous, but mostly positive effects of a unilateral carbon emission reduction by the European Union on the degree of vertical specialisation of European industries. Border taxes are successful in protecting upstream industries, but with negative side effects for downstream industries.

Publication|Ungated working paper (older version)| Model & data (ZIP)|


Designing an EU Energy and Climate Policy Portfolio for 2030: Implications of Overlapping Regulation under Different Levels of Electricity Demand (2014), Energy Policy 75, 91-99, with Florens Flues, Andreas Löschel, and Benjamin Johannes Lutz.

The European Union׳s current climate and energy policy has to operate under an ex ante unforeseen economic crisis. As a consequence prices for carbon emission allowances in the EU Emissions Trading System collapsed. However, this price collapse may be amplified by the interaction of a carbon emission cap with supplementary policy targets such as minimum shares for renewables in the power sector. The static interaction between climate and renewable policies has been discussed extensively. This paper extends this debate by analysing the efficiency and effectiveness of a policy portfolio containing a cap and trade scheme and a target for a minimum renewable share in different states of aggregate electricity demand. Making use of a simple partial equilibrium model of the power sector we identify an asymmetric interaction of emissions trading and renewable quotas with respect to different states of aggregate electricity demand. The results imply that unintended consequences of the policy interaction may be particularly severe and costly when aggregate electricity demand is low and that carbon prices are more sensitive to changes in economic activity if they are applied in combination with renewable energy targets. Our analysis of the policy interaction focuses on the EU, yet the conclusions may also be of relevance for fast growing emerging economies like China. 

Publication | Ungated working paper | 


Give and take: How the Funding of Adaptation to Climate Change can Improve the Donor's Terms-of-Trade (2014), Ecological Economics 106, 44-55, with Gunter Stephan.

This paper discusses the interplay between international trade, regional adaptation to climate change and financial transfers for funding adaptation. It combines insights from a theoretical model of North-to-South transfers with the findings of a calibrated dynamic multi-region multi-sector computable general equilibrium model that takes into account the impacts of climate change and the adaptation to it. Assessing the effects of adaptation funding indicates that funding of adaptation in developing regions can be Pareto-improving. Not only will developing regions, which do not own sufficient resources for adapting optimally, profit from receiving adaptation funding. Terms-of-trade improvements in the high and middle income donor countries can dominate transfer costs and hence lead to a net-welfare gain in almost any developed region except North America. As such our consideration adds a new argument for financially supporting adaptation in the developing world besides the well-known ones such as fairness and incentives for participation in a global climate treaty.

Publication | Ungated working paper | 


Exchanging Goods and Damages: The Role of Trade on the Distribution of Climate Change Costs (2013), Environmental and Resource Economics 54(2), 261-282.

The impacts of climate change vary significantly across world regions. Whereas tropical and subtropical regions are expected to suffer severely from the effects of climate change, the impacts in northern latitudes should remain relatively moderate. However, regions are not self-sufficient, and the costs of climate change can spread across regions through international trade. I study the international spillover of climate impacts within a regionalised, climate-sensitive, dynamic computable general equilibrium model of the world economy. Using data from a global climate model shows that the world regions face welfare losses between 0.6 and 2.1 % due to climate change. I also show that climate change affects terms of trade and sectoral competitiveness. By means of a decomposition method, the extent of spillover impacts through international trade can be identified. Spillover impacts significantly affect, either positively or negatively, the total costs of climate change for a region. For regions with low exposure to climate change and high adaptive capacities, spillover effects are responsible for a 1/6 of the total cost of climate change. 

Publication | Ungated working paper| 


Book chapters

Der Europäische Emissionshandel als zentrales klimapolitisches Instrument, Einbettung, Erfahrungen aus der Praxis und Wirkungsanalyse (with Andreas Löschel & Peter Heindl), in Angrick, Kühleis, Landgrebe & Weiß (Eds.): 12 Jahre Europäischer Emissionshandel in Deutschland: Bilanz und Perspektiven für einen wirkungsvollen Klimaschutz (2018), Metropolis Verlag (in German).

On the Coherence of Economic Instruments: Climate, Renewables and Energy Efficiency Policies (with Andreas Löschel), in Parry, Pittel & Vollebergh (Eds.): Energy Tax and Regulatory Policy in Europe: Reform Priorities (2017), MIT Press.

International Adaptation Funding and the Donor's Welfare Maximization (with Gunter Stephan), in A. Markandya, I. Galarraga, & D. Rübbelke (Eds.): Climate Finance: Theory and Practice (2017). World Scientific.

Kosten des Klimawandels und Auswirkungen auf die Wirtschaft (with Gernot Klepper, Wilfried Rickels & Reimund Schwarze), in Brasseur, Jacob & Schuck-Zoller (Eds.): Klimawandel in Deutschland. Entwicklung, Folgen, Risiken und Perspektiven (2016), Springer, Berlin Heidelberg (in German).